Advisers set for tighter EU scrutiny over tax schemes

(BRUSSELS) - EU Member States reached political agreement Tuesday on new transparency rules for tax advisers, accountants, banks and lawyers who design and promote tax planning schemes for their clients.

EU finance ministers reached agreement on the proposal, which aims to boost transparency in order to tackle aggressive cross-border tax planning, at a meeting in Brussels this morning. The draft directive is the latest of a number of measures designed to prevent corporate tax avoidance.

Recent media leaks such as the Panama and Paradise Papers have exposed how some intermediaries actively assist companies and individuals to escape taxation, usually through complex cross-border schemes.

Once in force, tax intermediaries, such as tax advisers, accountants and lawyers, who provide their clients with complex cross-border financial schemes that could help avoid tax, will be obliged to report these structures to their tax authorities.

In turn, Member States will exchange this information with each other, further increasing scrutiny around the activities of tax planners and advisers.

Member states will be obliged to impose penalties on intermediaries that do not comply with the transparency measures.

"Enhancing transparency is key to our strategy to combat tax avoidance and tax evasion", said Bulgaria's finance minister Vladislav Goranov, for the EU presidency: "If the authorities receive information about aggressive tax planning schemes before they are implemented, they will be able to close down loopholes before revenue is lost."

Member states have been finding it increasingly difficult to protect their tax bases from erosion, as cross-border tax planning structures become ever more sophisticated. The draft directive is aimed at preventing aggressive tax planning by enabling increased scrutiny of the activities of tax intermediaries.

The draft directive establishes 'hallmarks' to identify the types of schemes to be reported to the tax authorities. The requirement to report a scheme won't imply that it is harmful, only that it may be of interest to tax authorities for further scrutiny. Whilst many schemes have entirely legitimate purposes, the aim is to identify those that do not.

The Council will now adopt the directive without further discussion once the text has been finalised in all official languages. Then Member States will have until 31 December 2019 to transpose it into national laws and regulations.

The new reporting requirements will apply from 1 July 2020. Member states will be obliged to exchange information every three months, within one month from the end of the quarter in which the information was filed. The first automatic exchange of information will thus be completed by 31 October 2020.